Barnes & Noble in talks with Gemstar

Is bookseller serious about a merger?

By

RussBritt

NEW YORK (CBS.MW) -- Barnes & Noble Inc. said Friday it's in talks with Gemstar-TV Guide International Inc. about a business relationship, and the bookselling giant isn't ruling out a potential merger.

The two companies are looking at publishing electronic books as well as several other prospective business combinations. But when Mary Ellen Keating, a Barnes & Noble
BKS, -0.47%
spokeswoman, was asked about the prospect of a merger of the two companies, she didn't say it was out of the question.

"We're discussing a whole range of issues, and all options are open," Keating told CBS.MarketWatch.com.

That marks a reversal from earlier in the week, when the talks first were reported. At that time, Keating said Barnes & Noble and Gemstar
GMST
were not discussing a merger.

"That was accurate at the time, but now we're discussing a number of things," Keating said. She declined to elaborate.

In an abbreviated session, shares of Barnes & Noble gained $1.19 to $27.94. Gemstar's stock rose $2.63 to $46.38. Between the two stocks, more than 1.75 million shares changed hands.

However, Gemstar analyst John Corcoran at CIBC World Markets said he doubted the companies were seriously discussing a merger. Pasadena, Calif.-based Gemstar develops and licenses interactive technology and systems aimed at consumers seeking video, programming information and other data.

Corcoran said Gemstar has just made several purchases, including the buyout of TV Guide, completed in July.

"The company's in the middle of digesting its biggest meal ever," Corcoran said. "The company's had a lot on its plate."

Other recent acquisitions include the September purchase of French e-publisher Les Editions, based in Paris. Other e-publishing buyouts include NuvoMedia Inc. and SoftBook Press Inc., both made in January. There also have been a number of Gemstar strategic partnerships announced this year.

That's why Gemstar is unlikely to put itself on the market, Corcoran said. Corcoran added that Henry Yuen, Gemstar's chairman and chief executive, has taken great care to position the company in electronic publishing's future. A Gemstar purchase in the face of so many purchases would be surprising, to say the least, he said.

"My jaw would drop and you would have to pick me up off the floor and give me CPR to resuscitate me," Corcoran said.

Barnes & Noble has made its mark in the brick-and-mortar retail world, but its online book site is performing sluggishly. Combining with Gemstar would bring two entities that are only remotely related, Corcoran said.

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